Correlation Between Algoma Steel and POSCO Holdings
Can any of the company-specific risk be diversified away by investing in both Algoma Steel and POSCO Holdings at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Algoma Steel and POSCO Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Algoma Steel Group and POSCO Holdings, you can compare the effects of market volatilities on Algoma Steel and POSCO Holdings and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Algoma Steel with a short position of POSCO Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Algoma Steel and POSCO Holdings.
Diversification Opportunities for Algoma Steel and POSCO Holdings
0.17 | Correlation Coefficient |
Average diversification
The 3 months correlation between Algoma and POSCO is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Algoma Steel Group and POSCO Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on POSCO Holdings and Algoma Steel is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Algoma Steel Group are associated (or correlated) with POSCO Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of POSCO Holdings has no effect on the direction of Algoma Steel i.e., Algoma Steel and POSCO Holdings go up and down completely randomly.
Pair Corralation between Algoma Steel and POSCO Holdings
Assuming the 90 days horizon Algoma Steel Group is expected to generate 1.78 times more return on investment than POSCO Holdings. However, Algoma Steel is 1.78 times more volatile than POSCO Holdings. It trades about 0.01 of its potential returns per unit of risk. POSCO Holdings is currently generating about -0.01 per unit of risk. If you would invest 162.00 in Algoma Steel Group on October 5, 2024 and sell it today you would lose (38.00) from holding Algoma Steel Group or give up 23.46% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Insignificant |
Accuracy | 99.56% |
Values | Daily Returns |
Algoma Steel Group vs. POSCO Holdings
Performance |
Timeline |
Algoma Steel Group |
POSCO Holdings |
Algoma Steel and POSCO Holdings Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Algoma Steel and POSCO Holdings
The main advantage of trading using opposite Algoma Steel and POSCO Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Algoma Steel position performs unexpectedly, POSCO Holdings can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in POSCO Holdings will offset losses from the drop in POSCO Holdings' long position.Algoma Steel vs. Algoma Steel Group | Algoma Steel vs. Evolv Technologies Holdings | Algoma Steel vs. Valens Semiconductor |
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Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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